buying a new car and credit question?

we want to buy a new car and want to pay for it full in cash because we don't want to get financing bc the rates are higher than what the bank is paying us in interest. so its cheaper for us to pay in cash if that makes sense. but i read somewhere that having a car payment is actually good for getting a loan for a home? dh's credit score is over 800, does it really matter to have a car payment or not really bc of his great credit?

Posted on September 2, 2011 at 2:38 am
WMforever
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(8) Comments

Alliesauce
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We paid off our car before looking for a house... Showing that you make payments on time is a good thing, but I think it's even better to go into something with no revolving debt.  We have a Visa that we use for gas and groceries, as well as a couple consumer credit accounts, which we buy things on in order to show "payment history" but we pay them off in full before ever owing interest.  FICO scores are confusing for sure, I've heard the whole schpeal about if we were to actually always carry a revolving balance and be paying these companies interest then scores would actually be higher.  I'd rather them take a few points off our scores and have them shove their interest where the sun don't shine!! ;)  If his score is that high to begin with, you should have no issues whatsoever with rates, etc... I'd pay cash for your new wheels!! :)  My DH's score is just under 800 and we got the best loan rate available at the time- 4.25. :)

Posted on September 2, 2011 at 3:10 am
prbetsi75
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I've actually heard that making a big purchase like a car around the time you're trying to buy a home can be a bad thing.  If his credit score is that high, then don't mess with it.  Pay cash!

Posted on September 2, 2011 at 3:40 am
BlingBride22
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IMHO I would not pay for a car in full unless you are planning on having the car for 10+ years. My whole family works in the automotive industry and you will get SCREWED if you ever decide to trade or sell your car before then and will NEVER get back what you bought it for. With that said it all depends really on the bank. They do like seeing that you are making payments BUT it will take away from how much you will get approved for. They take all of your bills, add them up and then subtract that from your approval. So for example if they calculate that you can handle a $6000 dollar payment they then take all your bills (lets say $3000 a month) so your total approval is $3000 kwim?

Posted on September 2, 2011 at 4:14 am
WMforever
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thanks girls! bling so if we pay for it cash and want to trade it in they'll give us less $ than someone who hasnt paid it all off? i know we'd never get back what we paid for it when we trade it in but do you think we'll get less than someone who financed it? hmmm!


i know u also have the ford edge which is what i really want but do you know they're resell values? dh wants a rav4 or crv because of their resale values (mostly also bc they're so freakin reliable). but i dont like them bc of their size. i want something a tiny bit bigger.

Posted on September 2, 2011 at 4:24 am
Alliesauce
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You'll never get back what you pay for a car, ever... they depreciate in value as soon as you drive them off the lot. :)  I'm not too worried about it- we have a 2011 Hyundai Sonata SE which we paid off in less than a year.  It feels awesome to say that we paid off a 2011 car in 2011!! :)  I'd rather not worry about having a car payment.  We do plan on having this car for 10 years though, we will probably give it to Kylie as her first car. :)

Posted on September 2, 2011 at 4:32 am
MsMac
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If it helps- we bought two cars (well bought one and leased one) on the same day in July of 2010.  We closed on our house in April 2011.  The car loans didn't affect our ability to buy a house.  Credit scores are based on your ontime payment history and how much of your available credit you are using (along with a few other things).  So in our case the car loans really weren't a big deal because we didn't have a lot of other debt and have a sort of high combined income.


I think the resale on the Edge is decent.  I have a Lincoln MKX and it seemed like the ones coming in after being leased (3 years old) were reselling for like 20-25k below the sticker price.  I would guess that the Edge is depreciating at about the same rate.  And for what it is worth- part of the reason why we traded DH's car was because his milage was lower and that is part of how they determine what they'll give you for the car.  I think it is easier to a dealer to resell a car that is newer (in our case it was a 2005) and doesn't have a lot of miles (I think his was at like 65k when he traded).  With that being said- from a financial planning perspective the best route is to buy and drive until the car dies and assume that you'll have it for 10 or more years.

Posted on September 2, 2011 at 6:15 am
blustarfruit
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I would just pay cash.  Like Allie said, you'll never get what you bought back on any car, so what's the difference if you have a payment or not?  I'm currently going through the pre-approval process, and I think that's the only area where extra payments matter.  We have to tell the mortgage company about my student loans and both our car payments so they can calculate what we can actually afford, taking those things into account.  If your credit score is already high, I wouldn't worry about having another account to pay off just because and wasting money on interest!

Posted on September 6, 2011 at 11:49 pm
HolyMolyMatrimony
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I would NEVER want a payment if we could go with out it- so If I had the money I would pay cash (given that wouldn't put us in the hole or anything and we could REALLY afford it).   We already have enough credit as it is- and good credit- its just not worth it to me regardless.  If that wasn't an option I would get a huge chunk down so my payments a joke.

Posted on September 7, 2011 at 3:38 pm

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